Preparing industries for the end of carbon emissions
Making investments in tough times is a good idea in theory but more difficult in practice. Yet there is one project that the EU is demanding that industries prioritize. With the current reduction of emission allowances on the market – there will be zero left by 2039.
“Companies covered by the system will sooner or later need to phase out all fossil emissions”, Helen Dömstedt explains, Environmental Regulations Manager at Adven.
The economic slowdown is a fact in Europe. This affects industrial production all over Europe. Long-term investments with longer pay-back time may be put on hold. Sustainability projects such as energy efficiency improvements and fuel conversion are such examples.
At the same time, COP28 recently took place. The climate conference resulted in an agreement that signals a start of a full phase out of fossil fuels world-wide. The EU had already committed to the Fit for 55 reform package, a promise to reduce greenhouse gas emissions with 55 percent by 2030. The direction is clear, Europe is phasing out fossil fuels, the only question is how fast.
The EU Emissions Trading System (ETS) system is a good indicator on how likely we are in reaching our goals, according to Helen Dömstedt. The system is one of the most effective tools of reducing emissions in Europe and since its implementation it has contributed to reducing emissions by 41% in the sectors covered by the system.
”We see that the system is working, emitting greenhouse gas emissions need to cost money and now it increasingly does. There are of course details that can and will be fine-tuned but overall, it is a system that others can follow. The system then needs to continuously develop to always encourage companies to perform better. For instance, how the ETS can boost the use of efficient technologies and techniques for capture and storage of carbon emissions,” says Helen Dömstedt.
Today, 43 percent of all allowances are granted for free. In April of 2023, the EU decided to phase out these allowances even faster, and for example for carbon intensive industries they will be phased out completely between 2026 and 2034.
The effect on energy-intensive industries
In the near future a bigger proportion of allowances consumed will have to be bought. The issued emission rights will also decrease with 4,4 percent per year until 2030. If the pace continues also beyond 2030, there will be no allowances to emit CO2 emissions by 2039.
To eliminate carbon emissions while keeping a steady course through the economic downturn, actors covered by the ETS-system, such as electricity and heat generation and energy intensive industries, need to consider new ways of thinking and collaborating.
“We can help industries realize sustainability projects that risk not being realized in these uncertain times. This storm will pass, and when it does, our customers will be equipped for the future,” says Henrik Johansson Casimiro, SVP Industrial Energy Solutions at Adven.
EU decisions with impact on energy-intensive industries
- Free allowances will be phased out which have and will have a substantial impact on operational costs
- More activities included, such as some industries without emissions of greenhouse gases
- Allocation of free allowances will be granted on condition of performing energy saving measures
- All traded allowances phased out with 4,4 percent per year at least until 2030, making the trajectory for zero available allowances by 2039